Fed announces hike in interest rates by 75bps to combat inflation
US Fed FOMC announces hike in interest rates by 75bps to combat inflation.?This hike is?the fourth consecutive increase of 75 basis points this year.
US Federal Reserve FOMC meeting for November 2022 took place on the 1st and 2nd of November. The Federal Reserve raised interest rates by another 0.75 percentage points, or 75 basis points, on Wednesday in an effort to curb persistent U.S. inflation. This hike introduced on Wednesday would be the fourth consecutive increase of 75 basis points this year, raising the federal funds rate to a range of 3.74% to 4%. Long before the Federal Open Market Committee (FOMC) met, the markets forecasted this hike.
In order to make up for the "cumulative tightening of monetary policy" it has already implemented, the Federal Reserve hinted future hikes in borrowing costs could be made in smaller steps. Since the start of March, the US central bank has increased interest rates six times, which is the quickest pace of rise. On Wednesday afternoon, all four main stock indices were down by 2:55 p.m. (ET), gold was up by 0.13%, and BTC was up by 0.6%.
Raising interest rates can limit inflation by making borrowing more expensive. It also pushes up the cost of debt for Americans who are already facing higher prices for almost everything, including basics like food and rent. Consumers could anticipate higher expenditures for a variety of debts which includes credit cards, auto financing, mortgages, and interest rates on other variable-rate loans like home equity loans and home equity lines of credit (HELOC). Higher interest rates also deter economic expansion, which can lead to a recession in which many people lose their employment while already struggling with rising costs. Even though additional rises could be "painful," the Fed's stance is intended to bring down prices.
According to data from the Consumer Price Index, the annual inflation rate has remained persistently high, only declining from a peak of 9.1% in June to 8.2% as of September. That is much higher than the preferred inflation rate of 2% set by the central bank. According to U.S. central bank, rates would increase from 4.5% to 4.75% in 2023 and Goldman Sachs economists anticipated last week it to increase from 4.75% to 5% by March 2023. This implies that interest rates will continue to rise, making borrowing more expensive overall. In order to explain the rate increases and ongoing efforts to reduce inflation, Federal Reserve Chairman Jerome Powell will participate in a press conference on Wednesday at 2:30 p.m. EDT.
The Biden administration intends to set aside $13.5 billion to aid low-income American households in paying for heating this winter, according to a White House report released just before the rate increase. This is because customers in the US now pay 28% more to heat their homes than they did last winter as a result of the hot inflation.
Effect of the recent past hike :
The Fed raised interest rates most recently in September. Inflation continued to rise at a rapid clip in September, according to a Bureau of Economic Analysis report released last week, with the personal consumption expenditures index climbing 6.2% from a year earlier. In reaction to increased mortgage rates, sales of newly built homes fell 10.9% in September and were down 17.6% from a year earlier. The personal consumption expenditures (PCE) price index report showed an increase of 0.5% in September. In addition, the most recent Consumer Price Index (CPI) report showed an 8.2% increase in U.S. consumer prices in September.
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